Monday, October 31, 2011, 10/31/2011 10:51:00 AM

Toronto-based Marketwire distributes press releases via traditional methods (Associated Press, Bloomberg, etc.) as well as new media methods. Most of you have read or seen their work - we regularly read Marketwire pieces that assist companies in getting a particular message publicized.

Reuters is reporting that Marketwire has sued PR Newswire and several of its new employees who used to work for Marketwire. In its complaint, Marketwire accuses PR Newswire of hiring its former chief technology officer, co-defendant Shoeb Ansari, as part of a what it called a continuing campaign to steal its technology and gain access to customer data. Ansari, who was terminated from his Marketwire job in June 2010 and is now PR Newswire's chief information officer, allegedly has since lured several former colleagues to join him at New York-based PR Newswire.

A PR Newswire spokeswoman had no comment on the complaint, filed in the New York State Supreme Court in Manhattan.

Wednesday, October 26, 2011, 10/26/2011 10:33:00 AM

Reuters is reporting now regarding the damages request that TCW has made of the court in this long-fought battle over Jeffrey Gundlach's departure as an employee of TCW. As you'll recall, TCW prevailed in its claim the famed fund manager took trade secrets, although it is now up to a judge to decide damages.

Bradford Cornell, a damages witness for TCW said that without the use of proprietary information obtained from his former employer, Gundlach would not have been able to build up his new rival business Doubleline Capital so quickly and effectively."Without trade secrets, Gundlach's business wouldn't have been ready," Cornell told California Superior Court Judge Carl J. West on Tuesday. The $81.7 million figure was based on a hypothetical negotiation that would have occurred in the fall of 2009 if Gundlach had tried to buy the information contained in the trade secrets, Cornell said. Research on the internet suggests that Dr. Cornell is a professor at Cal Tech and also provides expert testimony in high-profile lawsuits through the Charles River Associates firm.

Pensions & Investments is reporting that Dr. Cornell acknowledged the basis for his assumption regarding the hypothetical negotiation was a pro forma accounting that Gundlach's associates had made regarding the amount of assets they assumed would be generated in their new business. They report: "Mr. Cornell said he made his calculations based on a pro forma financial statement that Mr. Gundlach's associates had developed for a new hypothetical asset management company. The statement, which TCW officials had discovered during searches of computers used by Mr. Gundlach's securities team in fall 2009, showed that Mr. Gundlach and associates had estimated that they would take $48 billion in assets away from TCW and would bring in $197 million in revenue in their first 10 months of operations from March 1, 2010, through Dec. 31, 2010."

Tuesday, October 25, 2011, 10/25/2011 09:14:00 AM

Bloomberg's Andrew Harris is reporting that Groupon, the now-famous purveyor of online discounts for local vendors, has sued a couple of its former employees and accused them of misappropriating trade secrets that could be used to benefit Google Offers.

We admit that we haven't seen the complaint, but the report from Mr. Harris suggests that Groupon is relying at least in part on an inevitable disclosure theory of the case. The article quotes from the complaint: “In their new positions with Google Offers and/or Google, Hanna and Nolan will provide the same or similar services as they provided at Groupon,” requiring them “to employ confidential and proprietary information that they learned while employed at Groupon."

Interestingly, in a separate lawsuit filed at the same time, Groupon is suing another former employee on grounds that her creation of a coupon-peddling site is a violation of her noncompete. MyFoxChicago.com is reporting that Groupon is claiming Tris Hnedak illegally founded the Tennessee-based Memphis Smart Deals after her termination. Groupon claims Memphis Smart Deals attempts to mimic the business model and strategies of Groupon and attempted to solicit at least some of the customers she serviced while working for Groupon.The complaint claims Hnedak said Groupon is “where she learned the daily deal business.”

We don't have any skin in this game but Groupon is obviously generating a legal strategy to address the flourishing competition it faces from seemingly every corner of the internet. We'll keep an eye on developments for you.

Monday, October 17, 2011, 10/17/2011 08:47:00 AM

From Intellectual Property Brief, a blog at Washington College of Law at American University, another story about a proposed amendment to the Currency Exchange Rate Oversight Reform Act which would create a private right of action in federal court for certain trade secrets cases.

Sens. Coons (D-DE) and Kohl (D-WI) are proposing a bill that would allow the suits in cases claiming trade secrets theft by foreign governments and companies.

Sen. Coons stated:

If our goal is to protect American jobs by leveling the playing field with countries like China, then we must take steps to protect American intellectual property from theft and counterfeit. When foreign companies and governments steal our ideas, they’re stealing more than just formulas and schematics — they’re stealing jobs. These amendments are rooted in specific concerns I have heard repeatedly from manufacturers in Delaware who operate in a constant state of fear that their innovations are going to be stolen and sold by a foreign company. Theft of intellectual property and trade secrets have had devastating impacts on American companies, and these amendments would help give our nation the tools to fight back.

Friday, October 14, 2011, 10/14/2011 04:24:00 PM

Toronto's Globe and Mail is reporting that Ontario Superior Court Judge Michael Quigley has denied Dr. Stanley Bernstein's motion to exclude the public from a nasty trial that involves his former obesity practice partner, Dr. Scott Seagrist.

The two doctors, both of whom operate “obesity practices” used to be business partners in clinics in Kitchener and London, Ont. Dr. Bernstein was seeking more than $10-million in damages from Dr. Seagrist, alleging that he violated their business agreement and misused confidential information. Dr. Seagrist filed a counter-claim, denying the allegations and seeking similar compensation from Dr. Bernstein.

In seeking to exclude the public, lawyers for Dr. Bernstein argued that his diet methods were “trade secrets” which competitors would try to use, if disclosed in open court.

The ruling by Judge Quigley indicated that he was not deciding whether or not the diet techniques were trade secrets, but whether Dr. Bernstein met the very high legal test to exclude the public from a court proceeding.

The judge noted that all 600-pages of a diet manual written by Dr. Bernstein was alleged to be confidential, even though much of the information was in the public domain. “A broad panoply of information is claimed by Dr. Bernstein,” observed Judge Quigley. The request for a closed court “was excessive and over-reaching,” the judge added.

It will be interesting to learn of Dr. Bernstein's response to this ruling - presumably he would rather settle than let the world in on the particulars of his obesity treatments.

Thursday, October 13, 2011, 10/13/2011 05:34:00 PM

In an unfortunately named case of United States v. Pu, the government has charged Yiaho "Ben" Pu of stealing trade secrets from the Chicago-based investment firm named Citadel LLC. Mr. Pu is only 24 years old.

Pu made an initial appearance yesterday before U.S. Magistrate Judge Maria Valdez. He is being held in federal custody while awaiting a detention hearing scheduled for tomorrow, according to prosecutors.

United States Senator Herb Kohl's office was thoughtful enough to provide us with a press release regarding proposed changes to the federal Economic Espionage Act that would permit a private right of action under federal law for trade secret misappropriation. Currently the EEA is only a criminal statute. Trade secrets are sometimes referred to as the "red-headed stepchild of intellectual property law." One of the reasons trade secrets are presently distinguishable from patent, trademark and copyright is that they are primarily governed as a matter of state law and, as most of you know, different states treat trade secrets and define them differently which sometimes leads to unpredictable outcomes for those seeking protections.

One of our good friends at this blog is David Almeling at the O'Melveny & Myers firm in San Francisco. Mr. Almeling has actively written regarding his proposal that trade secrets law be federalized and inconsistent state-by-state treatment be pre-empted. We are presently seeking his approval and that of the excellent patent blog, Patently-O, to re-post his recent take on this proposed amendment and his critique of the same.

Amendment will allow corporations to file legal grievances in federal court in cases of economic espionage

WASHINGTON – Today, U.S. Senators Herb Kohl and Christopher Coons (D-DE) introduced an amendment to the Currency Exchange Rate Oversight Reform Act aimed at protecting American trade secrets and innovation. The amendment gives companies the ability to go to federal court to stop misappropriation of trade secrets and allows them to seek compensation for losses due to economic espionage.

“The problem of economic espionage is not new, but it has grown and evolved as the information age has reached a point where trade secrets can circle the globe in the blink of an eye. U.S. corporations face intense competition at home and abroad. As much as 80% of the assets of today’s companies are intangible trade secrets. They must be able to protect their trade secrets to remain competitive and keep our economy strong,” Kohl said.In 1996, Congress enacted Senator Kohl’s Economic Espionage Act, making it a federal crime to steal trade secrets. Revolutions in technology since then, however, have enabled different methods of trade secret theft and economic espionage which pose a threat to U.S. companies to the tune of billions of dollars a year. As a result, Kohl is the sponsor of the “Economic Espionage Penalty Enhancement Act of 2011” to increase maximum penalties for stealing a trade secret to benefit a foreign company.To complement the criminal enforcement of economic espionage, this amendment would provide another way for companies to protect their trade secrets. Today, civil claims for trade secret theft must generally be brought in state court. This amendment enables victims of trade secret theft to seek injunctive relief, putting an immediate halt to trade secret misappropriation, and compensation for their losses in federal court. This amendment will help fill a gap in federal intellectual property law by providing legal protections for non-patentable, non-copyrightable innovations, on the condition that the owner of the innovation has taken reasonable measures to keep the innovation a secret.There are many examples of economic espionage throughout our country. Last year, a Chinese national working for an American automobile manufacturer was convicted of stealing trade secrets for a Chinese competitor. His actions were estimated to cost the American company between $50 and $100 million.

In Wisconsin, a disgruntled employee of a company that manufactures aftermarket airplane parts was prosecuted under the economic espionage statute and sentenced to thirty months in prison for attempting to sell trade secrets to competitors. The trade secret – details and measurements of particular airplane parts – took years and hundreds of thousands of dollars for the manufacturer to create, test and gain Federal Aviation Administration (FAA) approval. Fortunately, the perpetrator was caught before he sold the trade secrets, but had he been successful the manufacturer would likely have been forced out of business.

Monday, October 10, 2011, 10/10/2011 02:03:00 PM

From the Royal Oak (MI) Daily Tribune an interesting – and fundamentally sad – story about a 51 year-old produce clerk who’s being kept from his next job by the contention that he would unfairly reveal his former employer's trade secrets.

We talk a lot about how trade secrets – as a legal concept – goes far beyond classic technical information such as the secret formula for Coca-Cola. And rightly so.

The flip side of that issue, though, are the occasional forays into court by former employers seeking to enjoin employees who really can’t possibly have information that fits the category.

Knowing only what’s in the newspaper story, this appears to fall into the latter category.

The facts are that Anthony Settipani left his job with Randazzo Fruit Market after being turned down for a supervisor’s job. He decided to go to work for a competitor, Vince & Joe’s Gourmet Market.

Now Randazzo’s is trying to enforce a territorial non-compete against Settipani based on trade secrets.

Settipani’s lawyer, Elizabeth Sokol, was trenchantly quoted:

It’s ridiculous. They’re claiming that they are trying to protect trade secrets, proprietary information. (But) there’s no trade secrets on how to stack apples. They seemed to think he was involved in pricing decisions. The only pricing he’s involved in is he put price stickers on product. I haven’t been able to pin anyone (Randazzo representatives) on, ‘What are these trade secrets?’

A typical case like this one ends up with the former employer not succeeding in court, but with the former employee out of a job just because of the swirl of the litigation.